Tuesday, January 29, 2008

The Africa Growth & Opportunity Act, What You Should Know

It is undisputed, to a large extent, that President Bush made the wrong move with the war in Iraq. Nevertheless, there are a few things he did right. One was being the first President to hire qualified African-Americans to his cabinent--think current Secretary of State Condoleezza Rice & former Secretary of State Colin Powell. The other, was the enactment of the Africa Growth and Opportunity Act [AGOA]. Since the enactment, however, there has been much confusion as to what it means and how Africans & non-Africans, especially those in the apparel and textile industry can benefit from it. LADYBRILLE.com wraps up what has been a good month with all the scoop, directly from the source, about AGOA.

Special thanks to Christina Lucas, [Press Coordinator] and Laurie-Ann Agama, Director for African Affairs, both at the Office of the US Trade Representative, who helped facilitate getting the most accurate answers to our AGOA questions.

LADYBRILLE.com: Thanks for the talk and agreeing to the interview to help enlighten us.US trade official: Pleased to have an opportunity to talk with you and share information on the African Growth and Opportunity Act (AGOA) and its impact on U.S.-sub-Saharan Africa trade.

LADYBRILLE.com: Alright we have been hearing AGOA, AGOA! What is it?US trade official: AGOA is a trade preference program that provides duty-free access to the U.S. market for substantially all products exported from 39 eligible countries in sub-Saharan Africa. AGOA amends the U.S. Generalized System of Preferences (GSP) by expanding GSP product coverage (about 4,650 products) by more than 1,800 additional tariff lines, including apparel, certain textiles (e.g., towels, bedsheets, made-ups), ethnic printed fabrics, and handmade, handloomed and folklore articles and extending duty-free treatment for eligible sub-Saharan African countries until 2015.

LADYBRILLE.com: Are there any forms that must be completed to qualify for AGOA and where can those interested get them? US trade official: The vast majority of products from AGOA beneficiary countries may enter the United States duty-free. Standard customs forms and instructions for U.S. importers are available on the U.S. Customs and Border Protection website at http://www.cbp.gov/xp/cgov/import/.

LADYBRILLE.com: How is AGOA different from the General Systems of Trade Preferences? US trade official:First, AGOA extends the GSP program (which covers about 4,650 products) for beneficiary countries in sub-Saharan Africa through September 30, 2015. For regional exporters, this provides stable, longer-term access to the U.S. market than they enjoyed under the existing GSP program, which applies to developing countries around the world.

Second, AGOA eliminates the application of the GSP’s competitive need limitation for beneficiary developing countries in sub-Saharan Africa. (The competitive need limitation (CNL) is a ceiling; once import levels of a particular article from a particular beneficiary exceeds the CNL threshold, that article is no longer eligible for GSP treatment.)

Third, AGOA expands the GSP program by providing duty-free treatment for an additional 1,835 items, including footwear, luggage, handbags, watches, and flatware.

Fourth, separate AGOA provisions grant duty-free treatment to qualifying apparel articles of beneficiary sub-Saharan African countries AGOA also makes certain textile articles (i.e., towels, bedsheets, made-ups) from lesser developed AGOA beneficiary countries eligible for duty-free treatment. As a result of these provisions, very few products of beneficiary countries are not eligible for duty-free treatment under AGOA. The full list of products that may enter the U.S. duty-free under AGOA may be found [here.]

LADYBRILLE.com: After its implementation in 2000, it appears there has been controversy, depending on whom you ask, whether AGOA has indeed been beneficial to Africa, especially in light of the disintegration of the Multi Fibre Arrangementt [MFA]. So we don't lose our audience, in simple terms, tell us what the MFA is about and how AGOA was affected by the MFA with China?US trade official: As you noted, on January 1, 2005, the Multi-Fiber Arrangement (MFA), was the quota system that governed global textile and apparel trade under the World Trade Organization (WTO) Agreement on Textiles and Clothing (ATC). With the end of country quotas, competition in the textile and apparel sector sharpened worldwide. Studies by several organizations, including the U.S. International Trade Commission (USITC), the World Bank, and the WTO, predicted substantial changes in the patterns of textile and apparel trade, including competitive suppliers in Asia, particularly China, would increase their market share substantially as a result of the removal of quotas. Indeed, the Chinese share of the U.S. market in some apparel product areas, such as cotton trousers, increased dramatically in the first few months of 2005.

These developments were of particular concern to apparel producers in AGOA beneficiary countries, many of whom were relatively new to the international apparel trade. Many analysts believed that the heightened competition would force some of the marginal AGOA producers out of the market, and there were reports that factories in some African countries had closed. Some analysts, however, believed that AGOA’s tariff advantage would help some African producers remain competitive and retain their market share in certain apparel products.

Several U.S. retailers, including a growing number of small and medium-sized companies, indicated their continued commitment to sourcing from Africa. During January-September 2007 (most recent data available), U.S. imports of apparel under AGOA grew by three percent to $972.8 million compared to the same period in 2006. In order to remain competitive in the longer term, African producers will need to find ways to reduce their relatively high production costs, especially in areas such as electricity, telecommunications, and transport. African producers can also increase their competitiveness by accelerating the vertical integration of the cotton/yarn/textile/apparel value chain.

LADYBRILLE.com: Let's [transition] and talk about Africa's textile/apparel industry. I am aware that AGOA's has helped countries like South Africa, Ghana and Lesotho. Why does it appear that other Sub-Saharan African countries are not, per se, benefitting from AGOA?US trade official: AGOA provides opportunities, and an important determinant of a country’s success under AGOA, is whether or not the business environment is conduciveto trade and investment. AGOA’s impact has been uneven. This unevenness is largely attributable to the fact that many African countries need assistance in taking full advantage of the market access opportunities provided by AGOA, either because of inadequate infrastructure or because they have little experience producing and marketing value-added products for the U.S. market.

Although more African countries are taking advantage of the benefits of AGOA, much of the AGOA-related trade gains have been concentrated in a dozen or so beneficiary countries, and some countries have yet to export anything under AGOA. And most of the non-oil AGOA imports have been concentrated in the apparel sector. These gaps in AGOA’s impact – along with new challenges to AGOA apparel trade with the January 2005 elimination of global apparel quotas – justify a continued emphasis on trade capacity building support for AGOA countries. To address these challenges, the United States has sought to make available the tools and training that African producers need to make the most of AGOA and to diversify their exports to the United States.

For example, the U.S. Agency for International Development (USAID) has established four regional trade competitiveness hubs in Ghana, Senegal, Botswana, and Kenya, each with an AGOA adviser and other trade specialists to help eligible African countries increase their exports under AGOA. Among other things, this technical assistance has helped African businesses and farmers to identify market niches, to address quality and standards issues, to gain access to more timely market information, and to establish linkages with prospective American partners. For more information on the USAID funded Trade Hubs, visit the website at http://www.africatradehubs.org/.

LADYBRILLE.com: There have been some amendments to AGOA with AGOA IV. How will the amendments benefit Africa's apparel/textile industry? US trade official: In December 2006, President Bush signed into law the African Investment Incentive Act of 2006, which some have referred to as “AGOA 4.” The new law does three things that could boost the African textile and apparel sector: First, it extends to 2012 AGOA’s special third-country fabric provision – which allows lesser developed AGOA beneficiary countries to use fabric from any source in the production of apparel qualifying for duty-free treatment under AGOA. Incidentally, almost all of Africa’s AGOA apparel exports to date have been made of third-country fabric.

Second, it introduces new exceptions to the third-country fabric provision that require the use of African fabrics and fibers when those materials are found to be in “abundant supply.”

Third, the new law adds duty-free treatment under AGOA for several non-apparel textile items, such as fabrics, sheets, towels, and “made-ups,” if those items are wholly formed of African fibers. We believe that these new provisions provide a significant new opportunity for the African cotton, textile, and apparel sectors. We also believe that a longer-term approach is to focus on greater vertical integration and multi-country production sharing, such as current cooperation involving use of Zambian cotton yarn in South African AGOA apparel, and Malian cotton yarn in Mauritius’ AGOA apparel.

LADYBRILLE.com: I feel this is a two way street. It is indeed the premise Ladybrille is founded on. So, how do we encourage Western designers to purchase African fashion products using the lure AGOA has to offer?US trade official: We know that the American consumer values variety, predictability, simplicity, and longevity. African apparel producers could encourage and build on the two-way partnership AGOA has fostered between African producers and American buyers by developing and aggressively market African brands tailored to meet the demands of the American consumer.

In addition, African producers should develop an aggressive strategy to become more efficient and competitive, including streamlining the African textile and apparel industry, particularly output per worker, in order to survive in the post-MFA world.

Third, the USAID-funded trade hubs are providing technical assistance to facilitate AGOA trade, including sponsoring African entrepreneurs to attend trade shows such as the Magic Sourcing Show in Las Vegas which bring together apparel producers and buyers and generate increased trade. The trade shows also provide an opportunity for African apparel producers to showcase their unique products – all of which offer the duty-free AGOA advantage to buyers.

Finally, the work that Ladybrille.com is doing to promote AGOA and African apparel producers is critical to encouraging more American designers to learn about African fashion products and to source more apparel from Africa, and promotes increased apparel trade between the United States and countries in sub-Saharan Africa.

LADYBRILLE.com: [Thank you] Please feel free to always keep us on the pulse of the changes with AGOA and thank you [for what you] have done and will do on AGOA.US trade official:Thank you. I look forward to continuing this dialogue on AGOA and promoting increased trade between the United States and countries in sub-Saharan Africa.

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comments:

Hey Set! How are you and how is that cute niece of yours? Hope all is well. The short answer is "No" AGOA does not contradict or go against the current ban by the Nigerian government.

AGOA simple says if you make your products in Nigeria or the other African eligible countries,let's say handbags, you can export from Nigeria to the USA duty free. That simple. The interview goes into details on the qualifications e.t.c to qualify for such duty free exportation.

Obviously, the benefit is it helps stimulate Nigeria and Africa's economy as Americans are heavy consumers of fashion products, for example, among many items from foreign countries. Our overreliance on technology, the information age and outsourcing of a lot of our jobs makes us overly dependent on other countries for almost everything.In Africa's case, it is our moral obligation as Americans to support the World's poor.

Now let's talk about the ban. There are mixed feelings with this. I can understand why the legislature in Nigeria would pass such a bill. The only issue is how very broad the statute is so that it categorically bans almost all products. The deal is this, you've got textile mills closing left and right. One of the great big ones based in Kaduna just closed laying off over 4,000 workers. This means more children going hungry or without shelter and clothing because their mama and papa that worked at the mill no longer have their jobs.The high unemployment rate does little to offer optimism for a new job. Keep in mind almost 50 have closed in the past 7years.

Why did the Naija govt. feel the need for this piece of legislation? Our textile apparel workers and manufacturers simply cannot compete with the inlfux of fake Chinese goods in the Nigerian market in almost all genres at super cheap cost.It cost more for us to wear lace made in Nigeria than in China.

Also, the infrastructure for our fashion businesses is really really bad! Imagine most of the fashion businesses spending more money on buying fuel/diesel because 40% of their cost is allocated to the use of generators to run their businesses. Electricity/NEPA always taking light. With such crisis, companies can barely make profits, neither can they sustain daily business operations much less pay their employees. The govt. steps in to say ban all these competing goods, particularly Chinese goods, and encourage Nigerians to buy "Made in Nigeria" Clothing.

At this point, however,on a fundamental level, Nigerians themselves must see the need for change. Gucci, Pradas, Manolos are cool but Nigeria's rich and fashion forward need to reinvest their dollars, pounds and naira in Nigeria to stimulate the economy and help local designers and its industry.

Anyway, the BIG problem is the sweeping language of the legislation as it affects even our dealings with neighbors like Ghana that are not really a threat.

It's so complicated but hopefully as we begin to shine the spotlight on African fashions in the West, Africa's fashion forward from lawyers, legislators, fashion professors, publishers, schools/institutions, government agencies, designers, fabric manufacturers and many more can begin a real dialogue to save an industry in crisis. I think a big part of that will aslo include joining hands with the technology folks to see how we can have better equipments that can improve our productivity and keep us competitive with the Chinese. . . .Long answer but a passion of mine and one of the main reasons for starting Ladybrille.